The London rental market, Air B’n’B and our sharing economy: the legal implications

11 September, 2015

Prior to March 2015, short term rentals as temporary sleeping accommodation were only permitted if property owners obtained planning permission from the local authority. Section 25 of the Greater London Council (General Powers) Act 1973 provided that to use residential premises for temporary sleeping accommodation for less than 90 consecutive nights amounted to a material change of use and therefore planning permission was required. If planning permission was not obtained Londoners could have faced a potential fine of up to £20,000. (It is worth noting that this legislation does not apply outside of London.)

This legislation was rarely enforced in practice and a variety of London accommodation has continued to be advertised on Air B’n’B since its formation in 2008. During a consultation, the government sought to regularise the internet letting market and has since introduced The Deregulation Act 2015. The Act provides for an exception to Section 25, in so much as temporary sleeping accommodation is allowed in residential premises, so long as the cumulative number of nights does not exceed 90 and the person that is providing the accommodation is the person who pays the council tax.

This change has been greeted by property owners looking to capitalise on the thriving London rental market. Although the rules may now seemingly appear to have been simplified, the majority of the London population cannot afford to buy their own homes and therefore, as we know, the rental market is extremely competitive. The question therefore arises over whether tenants are able to take advantage of the added income that short term letting can provide. This can be answered by turning to the provisions contained in their lease or tenancy agreement.

It is usual for leases to prohibit tenants from subletting all or part of their property and/or engaging in the business of renting property on a temporary basis. Tenants must be sure to check the precise wording that is contained in their lease to make sure that they are not breaching their lease covenants. If, as a tenant, you are not sure about the provisions, it is worth speaking to your landlord to obtain their consent to advertise on Air B’n’B rather than risk being found out and having your tenancy terminated as a result. Tenants must remember that the internet is a public forum and it would not be difficult for a landlord to find a listing of their own property. If a tenant is dishonest about the lets, this is unlikely to go down well.

Landlords have cottoned on to the issues raised by Air B’n’B, in particular regarding potential damage to property or incidents of nuisance or anti-social behaviour. In order to combat illegal sub-letting landlords are even looking to expressly prohibit Air B’n’B lets in tenancy clauses.

In summary, whether you are a landlord or a tenant considering the Air B’n’B market, it is important to think about all the implications before either entering a new tenancy agreement or advertising your property as a holiday let. In either scenario, don’t get caught out!